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How can you budget when you’re flat broke? How can you get out of debt when you’re in so deep you’re not sure where to start? You may have all of the dreams and aspirations in the world to get your debt paid off, but how do you begin when there’s not even money to make ends meet? It may be a challenge to pay off debt when you just have enough cash, but I am here to say, you CAN do it. You can make and follow a budget when you’re broke. Let me tell you how.
1. Go over your situation and assess:
I know that when I sit down every month to pay my bills, I am overwhelmed and instantly frustrated, but sitting down and assessing your finances is a very very important first step. Now is the time to write down every asset and liability you have. For liabilities, write down who you owe, how much you owe, the minimum payment and the interest rate you’re paying. For assets, write down who has your money, how much money they have and what interest rate you’re earning.
Also, write down exactly how much income you’ve got coming into your household. If you’re on a commission basis, average last year’s income, or use your base pay amount if you have one. Knowing exactly where you’re at financially is the first step to budgeting when you’re broke.
2. Get a budget going, and decide what’s more important
Now that you know what your assets and liabilities are, it is time to get down to the dirty and start your expenses. You will need to write down your bills in order of priority. First, all your most important bills should be first, such as your mortgage/rent, and your utilities. Second, go to your loan payments, credit card bills, anything that will impact your credit score. Lastly, should be your non-necessity items like; phone bill, cable, extra activities for your children, or any entertainment. Your first priority should be the necessities.
3. CUT EXPENSES
Okay, now it’s time to get to the nitty gritty and the most unfun part of budgeting, and it’s not easy. I am not here to tell you to cut your cable off…but I am here to tell you this is the time to assess and figure out your “needs” vs “wants”. Do you REALLY have to have that new shirt that you saw at the store earlier this week? Do you REALLY need your cable? This really needs to come down to what you and your family NEEDS to survive vs what you want to look good or feel good.
I am here to tell you this is TOUGH, real tough, but it has to be done if you are serious about getting ahead. Really take a long look and decide what things you can live without until you can get ahead. You can always come back to those thing once you can actually afford it. Use those savings towards your debt.
4. MAKE A PLAN
And stick to it. Remember your necessities come first. If you absolutely HAVE to, let the others be late. Be careful with that, some will accrue late payment fees, then you are just accruing more debt. Can you and are you able to get a second job? Are you willing to get a second job? Are there other ways you can make money such as a yard sale? If you can do it, do it and put that extra money towards your debt. Work on trying to get lower interest rates on credit cards or loans. You really can’t know if it is possible unless you ask.
My family accrued medical debt when my Husband didn’t qualify with insurance through his job yet. We probably racked up a good $20,000 just for one emergency visit. It’s terrifying…but we were able to qualify for an adjustment because of our income, but we had to call and get it set up. Also, some of the bills will offer you a settlement if you can pay a lump sum, but you have to ASK.
Budgeting can be seriously daunting. But, it can be done. We have done it, and continue to do it. There are plenty of times we have to sacrifice things in order to accomplish a certain financial goal. Really, just imagine the day you won’t have anymore debt to worry about…ahhh, that will be the day. But, really in the end I promise, your hard work with be worth it.
Resources for you:
Credit repair: I highly recommend them, helpful and easy!
Credit reports: Check your credit score for FREE.
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